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In survival mode: gear makers gird for the year ahead While some observers were looking into the crystal ball for 1999's semiconductor industry prospects, many vendors of semiconductor production equipment are suffering in the here-and-now. At last week's poorly attended Semicon/Southwest 98 in Austin, Texas, William C. Monigle, director of corporate relations for Micrion Corp., pronounced the current capital equipment industry conditions as "grim." "We don't see a strong resurgence in our core business," which is supplying focused ion beam (FIB) equipment for making semiconductors and data storage products, he added. At the same time, "we don't see things getting worse." Micrion is hoping to ride out the downturn, this year and continuing into 1999, through the introduction of new products which involve technology for advanced semiconductor manufacturing, such as the C3D three-dimensional in-line defect analysis and critical dimension measurement tool the company unveiled last week at Semicon/Southwest. "The technology products will keep us going," Mr. Monigle said. Just as Semicon/Southwest was opening, Micrion issued an earnings warning, saying it expects its 1Q99 revenues, for the quarter ended Sept. 30, to be between $10 million and $11 million, down from $14.8 million in 1Q98. The company expects a net loss of $0.20-$0.25 a share, compared with year-ago net income of $0.15. Micrion expects to report its quarterly results on Thursday, Oct. 29. "Continued weakness in the semiconductor and data storage industries has resulted in a decline in demand for a wide variety of capital equipment. This decline has impacted Micrion's business, resulting in reduced shipments in the first quarter of our fiscal year. In addition, visibility of near-term business remains limited," stated Nicholas P. Economou, Micrion's president and CEO. The Big Question is When Dave Chavoustie, VP of worldwide sales for ASM Lithography (ASML), said on the Semicon/Southwest show floor, "Everyone knows it will turn around." The big question is `when.' Meanwhile, semiconductor manufacturers are still investing in new manufacturing technology-such as, ASML hopes, the new $8.2 million deep-ultraviolet, step-and-scan lithography system brought out last week by the Dutch company (see story, page 31). "There's still capital available for technology," Mr. Chavoustie said. "There's still a need for new technology." ASML will start shipping the new PAS 5500/700B next spring, in time for 0.15-micron process development next year. Semitool, Inc. is also hoping that the industry's never-ceasing need for technical innovation will get the company through this downturn. Semitool is one of the few companies now shipping production equipment for making chips with copper interconnects, one of the hottest areas in semiconductor manufacturing at the moment. It's "a slower business environment" right now for equipment suppliers, said Dana Scranton, Semitool's director of sales/marketing for surface preparation, at Semicon/Southwest. "We're guessing late '99, early 2000 for the turnaround." Semitool is "optimistic" about the equipment business in general, although the industry is now going through "one of the funky troughs," he added. Fujitsu Ltd. didn't hold out much hope for capital spending next year, saying Friday that its semiconductor group has cut its capital expenditure plans for the current fiscal year, which ends March 30, 1999, to 80 billion yen (about $678 million at last week's exchange rates) from 90 billion yen (about $763 million). Down, Down, Down There wasn't much good news in financial results released last week by a variety of semiconductor equipment and materials suppliers, and little optimism was expressed for the near term and next year. Ultratech Stepper, for instance, reported quarterly revenues were down 66 percent from a year ago, and nine-month revenues were off by 45 percent; Varian Associates said its Semiconductor Equipment business was off by 61 percent for the quarter and down 20 percent for the fiscal year (but off only 2 percent without figuring in its former Thin Film Systems division, sold last year to Novellus Systems); Electroglas said revenues were off 49 percent for the quarter and down 18 percent for the last nine months; AG Associates reported its revenues were down by 49 percent for the quarter and declined 7 percent for the fiscal year; Nanometrics said its quarterly revenues were down by 26 percent, but for the most recent nine months, revenues were up 9 percent; Du Pont Photomasks said its revenues fell off by 11 percent for its first fiscal quarter; and Veeco Instruments reported revenues declined by 8.5 percent in the quarter and by 2.3 percent for the nine months. Earlier this month, KLA-Tencor reported 1Q99 revenues fell off by 34 percent from a year ago, and Lam Research said its 1Q99 revenues plummeted 51 percent from 1Q98. Even more disheartening, AG Associates, Electroglas, Lam Research and Ultratech Stepper had net losses for their most recent quarters, while Du Pont Photomasks, KLA-Tencor, Nanometrics and Veeco Instruments had reduced net income. Varian Associates had "a significant operating loss" for its Semiconductor Equipment business in its fourth quarter, it said, but the company as a whole made money for the year. 'Never Be The Same?' "The classic sign of when we are ready for a turn is when industry executives start saying that this time it is different and they are never going to see the past again. It is always at the upturn peak and the downturn trough that you see these comments," says G. Dan Hutcheson, president of VLSI Research. Recently, Applied Materials CFO Joseph Bronson made exactly this type of prophetic statement, putting forth that gear makers will not enjoy the same 30-plus percent growth after this downturn. "Each company's business is different, so comparing them out of the downturn you want to be fair to the company," says Sue Billat, principal of BancBoston Robertson Stephens. "I admire the companies that have been able to stay in the black in this market." "If I look at, say, a Novellus, I would use them as an example of a company well positioned for an uptick," says Ms. Billat. "I don't think that they cut too deeply into muscle, and I think their outsource strategy has served them well in the long run. Because of this manufacturing strategy they should be able to pull out of the downturn effectively without the inability to ramp up." Page 1 of 2 |